What Is a Deductible in Insurance and How Does It Work?
Your share of a covered loss, subtracted before the insurer pays. It applies to damage to your own property and generally not to liability — and in Arkansas there is usually a second one you have not looked at.
Short Answer
The amount you pay toward a covered claim before the insurer pays the rest, up to the policy limit. A higher deductible lowers the premium and a lower one raises it. It applies to damage to your own property — and generally not to liability, which pays from the first dollar.
It is the simplest idea in insurance and the one most often misread, because people assume it works like a health plan: one number, met once, then coverage takes over for the year. Property insurance does not work that way, and three distinctions explain almost every surprise.
Three Distinctions That Cover Most of It
- It attaches to your property, not to your liability. Auto collision and comprehensive, homeowners property damage, landlord and renters property, commercial property — all carry deductibles. Liability generally does not. If you injure someone or damage their property, personal auto, homeowners and commercial general liability typically pay from the first dollar, because the money is going to a third party rather than to you.
- It applies per occurrence, not per year. There is no annual accumulator. Each separate covered loss carries its own deductible, so two storms in one year means two deductibles.
- There is often more than one on the same policy. This is the Arkansas-specific part, and it is where the surprises live.
Flat and Percentage, and Why It Matters Here
The second deductible most people have not looked at
A flat deductible is a fixed dollar amount. A percentage deductible is a share of the insured value, which means it scales with the house rather than sitting still. Because Arkansas sees frequent severe wind and hail, many home and commercial property policies here carry a separate wind and hail deductible expressed as a percentage — and on the peril you are most likely to actually claim for, that figure is typically much larger than the flat one applying to everything else. Two numbers, on the same declarations page, and most people have only read one. What yours is, and how to think about it, is on the wind and hail page.
And the deductible is not the same question as how the claim is valued
Subtracting the deductible is arithmetic. What the claim is worth before that subtraction is a separate matter — replacement cost, actual cash value, or an aged-roof payment schedule — and on an older roof that decision moves far more money than the deductible does. It is set out on the roof payment page. People compare deductibles between quotes and skip this, which is the wrong way round.
On a Business Policy
- Per occurrence, and sometimes per location. Each event carries its own, and a multi-location policy may set it by building or site rather than across the account.
- Separate wind and hail percentages, as on the home side. Same mechanism, larger numbers, same tendency to go unread.
- Business income uses a time deductible rather than a dollar one. Lost-income coverage typically begins after a set number of hours have passed rather than after a sum has been paid, which is a genuinely different instrument and catches owners who expected a figure to subtract.
- General liability generally has none. Covered third-party claims pay from the first dollar, which is the same principle as the personal side.
Choosing the Number
The trade is straightforward and the judgment is not. A higher deductible lowers the premium and moves risk onto you; a lower one does the reverse and costs more every year whether or not you claim.
- Take only what you could pay tomorrow. Not what you could raise in a month. The deductible falls due at the worst moment, and for a business it has to clear without choking cash flow.
- Weigh the premium difference against the exposure honestly. A saving collected annually against a cost paid once, at a time you did not choose. Which way that lands depends on reserves rather than on arithmetic.
- Look at the wind and hail number before the flat one. In Arkansas it is the deductible most likely to actually apply, so it deserves the attention the flat figure usually gets.
- Check both sides of the same quote. A lower premium with a higher percentage deductible is not a cheaper policy; it is a different allocation of the same risk. That comparison is on the coverage versus price page.
- Revisit it when reserves change. Most carriers allow a change at renewal and some mid-term. What you could comfortably absorb five years ago may not be what you could absorb now, in either direction.
Where this sits in what you already pay
Across our carrier market full coverage on the auto side generally runs $79–$105 a month, and bundled homeowners coverage generally runs $1,362–$2,250 a year. Cribb cross-market averages drawn from premiums on policies actually written through our carrier market. Illustrative rather than a quote. Deductible choice moves those figures in both directions, which is why the useful comparison is your own household across carriers rather than a rule about which number is right. Choosing the auto figure specifically is on the auto deductibles page.
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Frequently Asked Questions
What is a deductible in insurance?
The amount you pay toward a covered claim before the insurer pays the rest, up to your policy limit. A higher deductible lowers your premium and a lower one raises it. It applies to claims for damage to your own property rather than to liability claims.
Does a deductible apply to liability claims?
Usually not. Deductibles attach to damage to your own property — auto collision and comprehensive, homeowners property damage, landlord and renters property, commercial property. Liability coverage, which pays for injury or damage you cause to others, typically pays from the first dollar on personal auto, homeowners and commercial general liability policies.
Is a deductible per claim or per year?
Per claim, or per occurrence. There is no annual accumulator on a property policy the way there is on a health plan, so each separate covered loss carries its own deductible. Two storms in one year means two deductibles. Terms vary by carrier, so confirm on your own policy.
What is a wind and hail deductible?
A separate deductible applying specifically to wind and hail damage, and on Arkansas property policies it is frequently expressed as a percentage of the insured value rather than as a flat amount. Because it scales with the insured value, it is typically much larger than the flat deductible that applies to other losses — on the peril you are most likely to claim for.
Do commercial property policies have deductibles?
Yes. They usually apply per occurrence and can vary by location or by peril, with separate percentage deductibles common for wind and hail. Business income coverage generally uses a waiting period — a set number of hours — instead of a dollar deductible. Commercial general liability typically has none.
Can I change my deductible after buying the policy?
Often. Many carriers allow a change at renewal and some allow it mid-term. Raising it lowers the premium and lowers it raises the premium, and the right level depends on what you could comfortably pay at the moment of a loss rather than on what looks affordable in the abstract.
What if I cannot afford to pay my deductible?
It is subtracted from the claim payment, so repairs can stall while you find it. The protection is to set a deductible you could pay tomorrow and to keep a reserve against it, and for a business to factor it into cash-flow planning rather than treating it as a premium decision.
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Disclaimer: This article is general information and is not insurance, legal, tax or financial advice, and it is not a substitute for the terms of your own agreements or policies. This article is general information about insurance deductibles and is not a coverage determination. Deductible types and amounts, wind and hail provisions, percentage bases, waiting periods and how each applies vary by carrier, policy form and property, and are subject to underwriting and change; the policy actually issued to you controls. No deductible amounts, percentages or claim figures are stated here, because they differ materially between policies and a figure accurate for one would be misleading for another. Whether a specific loss is covered, and how a claim is valued, depend on the policy terms and the facts of the claim. Coverage is set by the insurance company and is subject to the terms, conditions and exclusions of the policy actually issued to you, which controls in every case. Cribb Insurance Group Inc is an independent insurance agency licensed in Arkansas, Oklahoma, Missouri and Texas. Reviewed 2026-08-10; insurance law and carrier filings change, and this article may not describe the current position after that date. Cribb Insurance Group Inc, 1601 SW Regional Airport Blvd, Bentonville, AR 72713 · (479) 286-1066 · service@cribbinsurance.com.